Quarterly Managers’/Asset Allocation Meeting



Quarterly Managers’ Meeting Minutes

Board of Administration

Tacoma Employes’ Retirement System

8:00 a.m., Thursday, February 21, 2008

Tacoma Municipal Building

Conference Room 16

733 Market Street

Tacoma, Washington 98402

MINUTES

1. Call to Order

The Tacoma Employes’ Retirement System Quarterly Managers’ meeting was called to order by Mayor Bill Baarsma, Chair.

Roll Call:

Members Present: Mayor Bill Baarsma, Rey Arellano, Bob Biles, Dave Peterson, Ken Turner, Chris Webster, and Diane Wetzel

Absent: Rodney Croston, Patricia Pabst, and Tim Ross

OTHERS PRESENT: MAGGIE COLEMAN

Investment Advisory

COMMITTEE: ALVA BUTCHER, JOE COOK, AND LYNDA LIVINGSTON

CONSULTANTS: ANDREW JUNKIN, WILSHIRE ASSOCIATES

Stephen Marshall, Wilshire Associates

Jill Traina, Wilshire Associates

Mike Paul, Barclays Global Investors

Sara Shores, Barclays Global Investors

DISTRIBUTION OF MATERIALS

The Retirement Board and Investment Advisory Committee received the following information from Wilshire Associates on CD and in hard copy:

• Executive Summary – Fourth Quarter 2007

• Supplemental Meeting Material – December 31, 2007

• Asset Allocation Analysis and Recommendations – February 21, 2008

• Investment Performance Analysis for December 31, 2007 (CD only)

Additional information provided by Wilshire Associates at the meeting:

• Further Asset Allocation Analysis – February 21, 2008

Quarterly Managers’ Meeting Minutes

Board of Administration

Tacoma Employes’ Retirement System

8:00 a.m., Thursday, February 21, 2008

PAGE TWO

DISTRIBUTION OF MATERIALS (CONTINUED)

THE RETIREMENT BOARD AND INVESTMENT ADVISORY COMMITTEE RECEIVED THE FOLLOWING ITEMS FROM BARCLAYS GLOBAL INVESTORS:

• Barclays Global Investors Alpha Tilts Fund Performance Review – February 21, 2008

EXECUTIVE SUMMARY / NUMBERS IN CONTEXT

ANDREW JUNKIN, OF WILSHIRE ASSOCIATES, REVIEWED THE EXECUTIVE SUMMARY AND THE INVESTMENT PERFORMANCE ANALYSIS REPORT WITH THE RETIREMENT BOARD FOR THE QUARTER ENDING DECEMBER 31, 2007 AND THE NUMBERS IN CONTEXT, LOCATED AT TAB 6 IN THE SUPPLEMENTAL MEETING MATERIAL HANDOUT.

It was noted that Tacoma Employes’ Retirement System’s rates of return were as follows: -2.78% for the quarter ending December 31, 2007, 3.97% for the one-year period, 10.26% for the three-year period, and 15.01% for the five-year period. The Executive Summary for the period ending December 31, 2007 serves as an addendum to the minutes.

INTRODUCTION TO ASSET ALLOCATION

Wilshire presented a full asset allocation study that examined the effects of 1) eliminating the home country bias that exists in the equity portfolio, 2) adding long duration fixed income to the portfolio, 3) including international REITs in the portfolio, and 4) adding a Private Markets allocation to the portfolio. Wilshire studied the effects on the expected risk and return characteristics of each new scenario, including the safety and cost of the benefits of the System. Wilshire presented 19 different scenarios for the System’s consideration and recommended Scenario N1. Relative to the current asset allocation, N1 has a higher allocation to fixed income (both core and high yield), has a lower allocation to public equities (eliminating the home country bias) and to REITs, and includes an allocation to Private Markets. The resulting characteristics of N1 show an increase in the expected return of the plan (moving from 7.48% to 7.85%) while simultaneously reducing the expected volatility of returns (from 10.40% to 10.34%). Wilshire also presented educational materials on each of the scenarios.

Presentations were provided on Eliminating the Home Country Bias, Global REIT’s, Long Duration Fixed Income Overview, and Investing in Private Equity.

BARCLAYS GLOBAL INVESTORS

Sara Shores and Mike Paul presented the Alpha Tilts Fund Performance Review to the Board.

Quarterly Managers’ Meeting Minutes

Board of Administration

Tacoma Employes’ Retirement System

8:00 a.m., Thursday, February 21, 2008

PAGE THREE

BARCLAYS GLOBAL INVESTORS (CONTINUED)

BGI discussed the quantitative strategy employed by Barclays to identify the S&P 500 stocks they purchase for the Alpha Tilts Fund, the changes made to correct for the recent negative performance in the fund, and the positive performance turnaround in 2008 compared to 2007.

The presentation ended with a graphical illustration depicting the strong positive alpha that has historically followed previous negative performance by the Fund.

An inquiry was made regarding what percentage of the total budget was devoted to research and development of quantitative measures. BGI indicated that they would forward this information to Wilshire Associates as soon as possible.

WHITE PAPERS / POLICY ON INVESTMENT MANAGER PRESENTATION

White papers were provided by Wilshire Associates on the following topics:

• Comparison of Global Equity Indexes

• 2008 Asset Allocation Return and Risk Assumptions – Andrew Junkin communicated that the Asset Allocation Return and Risk Assumptions are completed in February of each year. Tacoma Employes’ Retirement System’s asset allocation model is up-dated accordingly.

SCHEDULE FOR MEETING WITH INVESTMENT MANAGERS

The Retirement Board received the 2008 and 2009 schedule for meeting with investment managers.

CONCLUSION

Watch List

The Retirement Board requested a list of investment managers that were on watch at each Quarterly Manager’s meeting.

Wilshire Associates indicated that that information would be included each quarter in the Executive Summary.

May 2008 Quarterly Managers’ Meeting

Andrew Junkin from Wilshire Associates indicated that agenda items for the May 2008 Quarterly Manager’s meeting would be as follows:

▪ Continue reviewing the global equity structure

▪ Continue Wilshire’s Board education on the private equity markets asset class

Quarterly Managers’ Meeting Minutes

Board of Administration

Tacoma Employes’ Retirement System

8:00 a.m., Thursday, February 21, 2008

PAGE FOUR

CONCLUSION (CONTINUED)

August 2008 Quarterly Managers’ Meeting

Andrew Junkin from Wilshire Associates indicated that agenda items for the August 2008 Quarterly Manager’s meeting would be as follows:

▪ Invite a fund of funds manager to do an education presentation on private equity

▪ Wilshire Associates will prepare a short list (top 3) ranked fund of funds managers and provide a chart of the performance of these top three fund of funds managers

Adjourn

Upon consensus the meeting adjourned.

Maggie Coleman Robert K. Biles

ASSISTANT RETIREMENT SYSTEM DIRECTOR SECRETARY TO THE RETIREMENT BOARD

Kelli Boettger

RECORDING SECRETARY

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